FAQ & NEWS

This is for educational purposes only. The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.

  • Employee/Participant Questions

  • What are the current contribution limits?

    Type Of Limitation

    2024

    2023
    401(k) Elective Deferral

    $23,000

    $22,500

    401(k)Catch Up Amount

    $7,500

    $7,500

    Simple Plan

    $16,000

    $15,000

    Simple Plan Catch Up Amount

    $3,500

    $3,500

    IRA

    $7,000

    $6,500

    IRA Catch Up

    $1,000

    $1,000

    401(k) Maximum Annual Additions

    $69,000

    $66,000
    Maximum Compensation Limit

    $345,000

    $330,000

    Taxable Wage Base

    $168,600

    $160,200

  • What is Vesting?

    Vesting describes what portion of your contribution you are entitled to. You are always 100% vested in your deferral contributions and employer contributions that are safe harbor contributions. However, discretionary match and profit sharing contributions typically have a vesting schedule. Vesting schedules vary by plan, but the most common vesting schedule is the 2/20 schedule. On the 2/20 schedule you are 20% vested after 2 years of service and 20% more vested each year after that. Keep in mind that a year of service is usually defined as a year in which the employee works 1,000 hours or more.

  • I need to withdraw money from the Plan, what are my options?

    Upon termination of employment an employee will be able to roll the vested portion of their account to an IRA or another qualified retirment plan, or take a cash distribution. Please review the special tax notice that you will receive along with your distribution request form for information about tax consequences of taking a distribution.

    Qualified Retirement Plans are designed to preserve assets for retirement, but some plans allow employees to withdraw assets for other purposes.

    Loans - If loans are allowed you may generally borrow up to the lesser of 1/2 of your vested account balance or $50,000. The minimum is usually $1,000. You will be requried to repay the loan through payroll deductions.

    Hardship distributions, if allowed, are usually only allowed for the following purposes.
    1. Medical expenses for the participant, the participant's spouse, dependents or primary beneficiary on the date of the hardship withdrawal;
    2. Costs directly related to the purchase of a principal residence for the participant (excluding mortgage payments);
    3. Payment of tuition and related educational fees that are an integral part of education, including room and board for the next 12 months of post-secondary education for the participant, the participant's spouse, children, dependents or primary beneficiary on the date of the hardship withdrawal;
    4. Expenditures necessary to prevent eviction of the participant from the participant's principal residence or foreclosure on a mortgage on that residence;
    5. Payment of funeral expenses for the participant's parents, spouse, children, dependents or primary beneficiary on the date of the hardship withdrawal; and
    6. Payment of expenses for the repair of damage to the participant's principal residence due to a casualty loss.
    The amount you can withdraw is limited to the amount of deferral contributions you have made. The distribution will be subject to tax and possibly early withdrawal penalties. You will also be required to suspend deferral contributions for 6 months.

    In-Service

    Plans may allow an employee to take an distribution while they are still employed. If allowed most plans require that the employee be at least 59 1/2 or 65 years old. In order to take a distribution from the Deferral or safe harbor sources a participant must be over 59 1/2. The age limit does not apply to sources that have a vesting schedule, but the employee must be fully vested.
    Required Minimum Distributions (RMD) are required by law if you are over 72 and are either a greater than 5% owner or are no longer working for the plan sponsor. The amount of the required distribution is based on a formula using your age and life expectancy.

  • Employer Questions

  • What is a TPA and why does a plan need one?

    1. Excellent customer support. When you have bundled administration service you are still paying for administration services, but you do not get personal attention. Representatives who provide administrative services for plan managed by custodians are assigned hundreds of plans. They can't know who you are, what your needs are, or what your unique situtation is.
    2. Plan Design Support - We are able to work with plan sponsors to customize their plan to meet the specific needs of both the company and its eligible employees. After settling on a design we review how it is working for the company every year to be sure it is still fitting the company's and employee's needs, because circumstances can change rapidly.
    3. Compliance - Qualified retirement plan administration is a complex business and compliance failures happen all the time. They generally are a result of a lack of understanding by the plan sponsor's administrator or a lack of communication. By working directly with your administrators on a regular basis most of the common errors can be prevented. The errors not prevented can be detected with a detailed annual review and corrected promptly with minimal consequences. Bundled service providers do not have have the time or expertise to prevent, detect, or correct the common or unusual errors.
    4. Minimize Fiduciary Liability - One of the biggest sources of fiduciary liability has been related to class action lawsuits complaining about excessive recordkeeping and investment fees. If your administration services are bundled and provided by the custodian/investment provider they won't alert you to the fact that other custodians might provide a better value or that your plan my become qualified for reduced fees throught the same custodian. We regularly review plan custodian options and make sure the fees charged are competative. That's good for your retirement account balance and it's your fiduciary duty to your employees.
    5. Accuracy - A good TPA provides a trust reconciliation to make sure what was supposed to be contributed actually was deposited, that it was deposited to the correct participant, and in the correct source. Then accurate compliance testing is done, comprehensive easy to understand reports are prepared, and an accurate return is prepared.

  • Is my 401(k) plan required to have a fidelity bond?

    401(k) plans that have more than one participant or a participant and a spouse are generally required to have a fidelity bond equal to 10% of the value of the plan assets as of the end of the prior plan year. The amount of the bond is reported on the 5500, so be sure to keep your bond current. Don't invite an audit.

    Minimum Bond Requirements:

    Qualifying Assets - The bond must equal to 10% of the value of the total plan assets, with a minimum bond value of $1,000 and a maximum bond value of $500,000. The maximum limit is 1,000,000 if the plan holds employer securities.

    Non-Qualifying Assets - If more than 5% of the plan assets are non-qualifying, the bond must be equal to 100% of the value of the non-qualifying assets.

    Qualifying assets are assets like mutual fund shares issued by an investment company. Non-qualifying assets are assets like land.

  • What notices are required to be delivered to be delivered to participants and employees?

    Different plans will have different notice requirements depending on the plan provisions. The most common notices are:

    Enrollment Eligiblity - The enrollment eligibility notice should be delivered to the

    404(a)(5) fee disclosure and investment related information - This information must be given on or before the date the participant can first direct the investments and at least annually thereafter.

    Summary Plan Description (SPD) - The SPD mst be provided to participants within 120 days after the latter of the plan's effective date or adoption date. After that new participants must receive the SPD within 90 days after becoming a participant. All partipcants must receive a copy whenever the SPD is updated.

    Summary Annual Report (SAR)- The SAR should be delivered to participants (including eligible employees with no account balance within 30 days after filing the 5500)

    If your plan has the following features notices for these are also required:

    Safe Harbor - The safe harbor notice is required to be delivered between 120 and 30 days before the beginning of the plan year

    Automatic Enrollment - Automatic Enrollment notice if applicable or the (QACA) Qualified Automatic Enrollment, or (EACA) Eligible Automatic Contribution Arrangement Notice must be delivered between 30 and 60 days before the beginning of each plan year.

    Qualified Default Investment (QDIA)- If the plan has selected a qualified default investment the notice of that should be delivered to the participant at the same time the plan's investment options are presented.